The present invention is directed towards electronic trading systems. More particularly, certain embodiments of the present invention are directed towards using multiplier-adjusted lean levels for trading strategies in electronic trading systems.
An electronic trading system provides for electronically matching orders to buy and sell items to be traded. The items may include, for example, stocks, options, and commodities. Typically, an electronic exchange in the electronic trading system is used to match the orders. In addition, the electronic exchange provides market data to various client devices in the electronic trading system used by traders to place the orders. For example, the electronic exchange may provide market data such as prices for various items available for trading and trade confirmations indicating what trades have occurred at what quantities and/or prices.
In addition to trading single items, a trader may trade more than one item according to a trading strategy. One common trading strategy is a spread and trading according to a trading strategy may also be referred to as spread trading. Spread trading may attempt to capitalize on changes or movements in the relationships between the items in the trading strategy, for example.
A trading strategy may define a relationship between two or more items to be traded. Each item in a trading strategy may be referred to as a leg of the trading strategy. Once defined, items in the trading strategy may then be traded together according to the defined relationship.
Generally, when a leg of the trading strategy is filled (that is, an order for the item of the leg is matched), the remaining legs should be quoted at particular prices to maintain the defined relationship of the trading strategy. These prices may be referred to as hedge prices, for example. When the number of items in the trading strategy is greater than two, multiple sets of hedge prices can be chosen from to maintain the defined relationship. That is, there are numerous hedge prices that may be selected for each leg in order to meet the requirements of the trading strategy. Current systems employ a variety of techniques to choose one of the sets of hedge prices to use. However, each technique has disadvantages.